Wednesday, March 01, 2006

misdistribution of the fruits of growth

I wrote recently about the crushing debt that burdens Americans so that, for example, a bit more than 12 percent of American families spend more than 40 percent of their incomes on debt payments. And wrote also that American wages, which form the largest share of family incomes, have delcined by a bit more than 6 percent over the past few years.

So it resonated when I read the following this morning:
We have had economic stagnation in the United States for the last six years. The median income, six years in a row, certainly five years in a row and probably also for 2005, is falling back, year after year, compared to inflation. Therefore, I think what we are seeing, in many respects, is not just a kind of pathology—you didn't use the word but it was implicit in what you said-but the predictable pathology that comes into play any time the bulk of a society's citizens are losing their sense of forward progress, as I think today many people have in this country.
It's an extract from a really good discussion of a book,The Moral Consequences of Economic Growth, by Benjamin M. Friedman. And it appeared in the transcript of an IMF Book Forum

The book forum is interesting not just for Friedman's presentation, but also the comments of panelists and questions from the audience to which he responds.

Here's another extract. I urge you to go read the whole transcript.
My story is not about what's happening in the top ten percent of the income distribution. It's not about what's happening in the bottom 10 percent either. This is a story about what's happening from, say, the 10 to 90 percentiles. If the 10 to 90 crowd is not moving ahead, then my conclusion is these pathologies will emerge, even if the top 10 percent is doing very nicely.

The experience over the last six years in the United States is as concrete an example as one can find. In the United States today we're enjoying quite nice GDP growth. Real growth over these past six years has averaged 3 percent at the aggregate level. Well, that's terrific. Who could complain about that? But the point is, as I think we all know, the fruits of that growth are sufficiently misdistributed, that they have accrued entirely to the top 10 percent of the population.

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